A post on one of my LinkedIn groups highlighted a concern that I have long held with pre-reporting units. Over the years I have struggled to understand the benefit to anyone for doing so.
I remember as a Sales Manager for one of the OEM’s we would dread month end because it usually entailed phoning dealers to put pressure on them to capture sales cards on unsold vehicles in their stock. One divisional manager I worked for sometimes even captured a few sales cards ‘on behalf of’ dealers who did not comply with his request for them to do so!
We knew it was inherently wrong and we definitely felt embarrassed to force dealers to do so. But the pressure of putting the numbers on the board was symptomatic of the frenzy around achieving targets at all costs.
At any given point in time around 25% of dealer’s stock was in fact made up of pre-reports. It got so bad with one of our best selling dealers that they eventually had to stop capturing sales cards for an entire quarter because nearly 80% of their stock was pre-reported units. Another example of how pre-reporting can be over-cooked is when the OEM’s even negotiate with their large fleet customers such as rental companies to allow them to capture sales cards of units still on water! My goodness, how desperate do you have to be?
The concept of pre-reporting is one of the signs of piss poor management. Think about it: they are pre-reporting sales because they have no other skills to generate sales. It is such an incredibly short term solution with so many business risks and deception and is pretty much gross mismanagement.
The short shortsightedness of forcing dealers to pre-report is unacceptable. Retailers invest millions into their franchises and the OEM’s are putting severe financial strain on them by flooding them with stock. In reaction, the dealers are forced to sell these vehicles at crazy prices to relieve cash flow issues and open up floor-plan facilities to be able to order cars for customers. The distress selling affects residual values of models and makes the selling cycle more difficult as a result.
Price erosion ensues for the retailers and profitability suffers. Not to mention the warranty and maintenance implications as these automatically kick in when the sales card is captured. A customer may buy a vehicle that has been in stock for six months, already reported and not know that their warranty is already six months old. The consequences of pre-reporting are so far reaching I’m surprised it’s even legal! It is a completely selfish practice that has no regard for the other role players in the value chain, including customers. So why do they do it?
The reason I suppose is the same as why we buy goods on credit. We know its bad personal wealth management. We know it affects us financially and that eventually it catches ups with us. But the short term gratification that buying on credit enables us, driven by a healthy dose of greed and showing up the Jones’ ultimately triumphs over good sense. And so it is with the OEM’s.
My comment is this: if you are resorting to pre-reporting sales that have not occurred you are lying to yourself, your customers, your dealers and the market. You are admitting you have no skill to sell or market vehicles and quite frankly you do not deserve to be in any position of authority. You should be ashamed.